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10 Aug 2018

Hong Kong’s electronic goods sellers may like to know that the Commission’s investigation into the four electronics manufacturers took place in the broader context of concerns over commercial practices in the online retail sector.

In May 2017, the Commission published a report following a detailed inquiry into the e-commerce sector. This report highlighted a number of concerns, including the widespread practice of resale price restrictions and the use of automatic pricing algorithms. The Commission has also launched investigations into pricing practices which may prevent EU customers from enjoying a full range of choice, and competitive prices, for online cross-border sales.

Resale price restrictions are considered a form of resale price maintenance, which is a ‘hard-core’ violation of EU competition rules (that is, a violation which is so serious that it is presumed to be anti-competitive even if no actual harm is shown). Of most concern are pricing policies which put undue pressure on retailers to conform to specified retail prices. In this case, all four companies were found to have engaged in conduct which restricted the ability of online retailers to set their own prices in respect of branded goods.

Asus, which is based in Taipei, was found to have monitored the resale prices for a number of its computer hardware products, including notebooks and displays between 2011 and 2014. This policy of monitoring prices led it to intervene directly with online retailers who sold Asus products below recommended resale prices, with the result that such ‘recommended’ prices effectively became binding on retailers. Asus was fined EUR 63,500,000.

Denon & Marantz was fined for engaging in retail price maintenance during the period 2011-2015. Its core business includes audio and video consumer products such as headphones and speakers. While Denon & Marantz is based in Japan, the infringements mostly occurred on the Dutch and German markets. Denon & Marantz was fined EUR 7,700,000.

The Dutch manufacturer Philips was found to have pursued a policy of retail price maintenance from 2011-2013 in respect of a wide range of consumer electronics sold online, including kitchen appliances, coffee machines, vacuum cleaners, home cinema and home video systems, electric toothbrushes, hair driers and hair trimmers. For this infringement, Philips was fined EUR 29,800,000.

Finally, Pioneer was found to have engaged in retail price maintenance in respect of home theatre products, speakers, iPod accessories and hi-fi products. In addition, the Japanese manufacturer was found to have unlawfully limited the freedom of online retailers to sell its products to consumers located in different EU Member States. This policy had the anti-competitive effect of sustaining different prices for the same products in twelve different EU Member States from 2011 to 2013. For these infringements, Pioneer was fined EUR 10,100,000.

While the four manufacturers were found to have engaged in unlawful anti-competitive behaviour, they all benefitted from reductions in their fines as a result of their proactive cooperation with Commission investigators. These fine reductions ranged from 40-50% and were granted because the manufacturers had expressly acknowledged their wrongdoing. They also admitted to the underlying facts and provided significant added-value evidence to the Commission. As a result, the Commission was able to conclude its investigations faster and more efficiently. The four electronics manufacturers are entitled to challenge the Commission’s fines before the European Court of Justice, although their previous history of cooperation renders this unlikely. Nonetheless, further cases arising from the Commission’s decisions cannot be ruled out.

In particular, Hong Kong traders may be interested to see how the new Antitrust Damages Directive affects consumer claims. The Antitrust Damages Directive came into effect throughout the EU in December 2016 and permits private individuals and companies who have suffered harm as a result of anti-competitive behaviour to seek redress from the companies at fault. The Commission’s decision to fine the four companies constitutes binding proof of a violation of EU competition law, which will facilitate aggrieved customers who seek damages in actions before EU Member States’ national courts. As well as providing that affected customers have easier access to relevant evidence, the Antitrust Damages Directive clarifies that such customers are entitled to full compensation for the harm suffered, which covers compensation for actual loss and for loss of profit, plus payment of interest from the time the harm occurred until compensation is paid.

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